Nordea: Cross-Border, Real-Time Pooling – Gunnar Berger
Corporate treasury departments are opening up to the benefits of cash pooling. Gunnar Berger of Nordea explains how a cross-border, real-time pooling facility can bring greater transparency, simplified risk management and more streamlined accounting processes.
With corporate money transfers becoming quicker and more multi-directional, being able to access account information from across an organisation is a real advantage. This is especially the case for companies with international subsidiaries, which often have to oversee multiple transaction accounts and overdraft facilities. According to Gunnar Berger, head of treasury services at Nordea Bank, cross-border, real-time cash pooling solutions can help.
Nordea Bank has 1,400 branches in 19 countries, with a particularly strong presence in the Nordic region, including the Baltics, Poland and Russia. Like other banks in the region it has long offered a real-time cash pooling service, unlike the end-of-day zero-balancing products that are common elsewhere in Europe. Nordea has, however, decided to enhance its real-time cash pooling offering so that it works across borders. Although initially introduced only to the Nordic region, Berger is confident of its growth potential.
"We have provided Nordic banks with a real-time cash pooling service within each country for many years, but saw the opportunity to make it a cross-border solution," Berger says. "So for example, if a Danish subsidiary receives an incoming payment it will be immediately transferred to the parent company's account in Sweden. The same applies to withdrawals."
The benefits of this are many. As is the case with any form of cash pooling, the need for external financing is reduced as inter-company balances on transaction accounts are automatically netted against others. The pooling effect also allows companies to accumulate higher net interest rates than they could with individual accounts. According to Berger, however, other drivers have proved more significant.
"The pure pooling effect is not that strong in the Nordic region, as we are talking about four separate countries each with different currencies," he explains. "The real-time access to account information, reduced borrowing need and more simple agreements are most important for our customers."
Nordea's solution allows a customer to view account information from all of their international subsidiaries through one interface in real-time. This allows a company to simplify its banking strategy, reducing bureaucracy and increasing the transparency of transaction flows.
"Many local credit facilities today can become just one tomorrow, because with cross-border cash pooling you don't need local overdrafts anymore," Berger explains. "We have customers with presence in all four Nordic countries that have had to handle four different credit set-ups. Making one of everything, like we do, suits them very well."
As well as broadening its cash pooling service, Nordea has recently implemented a close connection to a partner bank, which will allow customers' euro balances to flow into their Nordea cash pool. Berger says that the broad interest in Nordea's two-pronged offering has surprised even him.
"We thought at the start that this would only be for the largest customers, but we have realised that companies, depending on what type of business they have, can derive different benefits," he explains. "It really lends itself to large companies in general and even some that are slightly smaller."
Looking ahead, Nordea sees great growth opportunities for both services. It will look to build more direct connections with partner banks and expand its cross-border, real-time capabilities to other geographies. "In the future I envisage integration with all Nordea units and with more partner banks, so that customers can concentrate balances from a greater number of banks," says Berger. "We will look at how our Nordic cash pooling model can be expanded, whether into our Eastern European, Western European or US units. We follow our customers closely."
In Berger's view, Nordea's scope and solid track record make it a good cash pooling partner. "We have a large, extended network, particularly in the Nordic and Baltic Sea region," he says. "Then there is our big balance sheet. It turned out that not every bank was able to provide credit throughout the financial crisis, but we were. That's something to consider for when the next crisis comes."